What a day today. Talk about a roller coaster. Lets take a look at a chart:
Whoa! Watching the market today was exhausting. For awhile there when we were down almost 800 it looked like the gate of hell were about to open up. Unfortunately, the DOW rallied back from the lows to settle down 370 points.
This is bad news for the bulls not the bears folks. You would think that the opposite would be true, but not in this type of market. Technicians explain that panicky markets like we find ourselves in right now do not find bottoms until you see capitulation selling on very high volume.
You need a complete washout with investors all running to the exits at once. Many technicians like Art Cashin were very disappointed by the rally on the close today.
Not only did we not capitulate, we sold off on relatively low volume of about 400 million shares. As you can see above, we have already had one day where 600 million shares traded on the DOW in September. The same problem was seen in the other indices like the S&P.
One of the problems that the market has right now is there are very few bids for stocks. No one wants to touch the market right now until things settle down. As a result, the market is vulnerable to violent unpredictable moves based on rumors and speculation/day traders.
The market popped this afternoon based on speculations that a global coordinated rate cut was in the works. Yeah, like that's gonna happen. The countries in the ECB alone can't agree on what do do with rates let alone the whole world. The Fed and the ECB also have two different mandates. The chances of a global rate cut are slim to none IMO.
We still aren't trading on fundementals. Expect the volatility to continue to be high with a downward trend until we see a "blood in the streets" selloff thats needed in order to stop the bleeding.
Keep an eye on the financial news. Bernanke and the world leaders are extremely panicked right now. Expect continued intervention into the world markets as they attempt to right the ship. I am keeping my trading to a minimum at these levels because we are both extremely oversold, and highly vulnerable to unpredictable shoe drops and stick saves.
You are pretty much gambling going long or short here IMO. You cannot "invest" in this type of market. Stay on the sidelines until the VIX(fear) drops and the volatility settles down before taking new positions.
I have never seen a market like this ever. It's certainly fascinating to watch!